Is Le Château on death watch?

DH Vancouver StaffJan 29, 2015 3:20 pm

Montreal-based clothing retailer Le Château has reported consecutive widening losses in recent years, following the same trajectory that led to the recent demises of Boutique Jacob Inc., Dutch fashion house Mexx and the significantly larger Target Canada chain.

In its most recent financial report, Le Château says it saw a $11.1-million net loss for the third quarter of 2014, which is up from the second quarter’s net loss of $3-million and the 2013’s third quarter net loss of $5-million.

Sales for the same quarter dropped to $58.1-million from the $65.4-million for the third quarter of 2013. The company’s sales figures have steadily dropped from its third quarter high of $83.8-million in 2008, which was also the year chain reported record year-end earnings of $345.6-million including $100-million from that year’s fourth quarter.

The company’s stock price reached a high of $17.05 in the summer of 2007, but it has been hovering well below a dollar per share since December 2014 – returning to the low value it held about fourteen years ago.

The retailer underwent a major store expansion throughout the 2000s, going from 175 stores with 755,000 square feet in 2004 to 243 stores totalling 1.262-million square feet in 2011. Since the peak in 2011, the company’s presence has retracted in size to 225 retail locations totalling 1.256-million square feet.

Two of Le Château’s stores within Vancouver have closed over the last two years, including one location at South Granville and another location at Granville and Helmcken streets in downtown Vancouver.

“Although Le Château enjoyed tremendous success in Canada at one time, many Canadians no longer recognize its value proposition – especially when compared to new competition,” Retail Insider’s Craig Patterson told Vancity Buzz. “Le Château’s prices are higher than many, its designs not necessarily on trend or compelling, and its quality is sometimes questionable. Not to mention, its stores are often over-crowded with too much merchandise.”

Le Château faces immense competition from other brands such as Zara, Joe Fresh and particularly H&M, which has rapidly expanded its presence in Canada since entering the market in 2004. This is in addition to the rise of online retailers, the upscaling of the Hudson’s Bay Company and the arrival of Nordstrom and Uniqlo.

Founded in 1959, Le Château has skated through turbulent times before, but it is unclear if it will be able to recapture a sufficient share of the market to be able to survive under its current business model. It employs over 2,500 people and about 35 per cent of its merchandise is made in Canada.

Le Château’s nationwide store presence is more than twice the reach of two other similarly scaled retailers that recently shutdown. When Boutique Jacob declared bankruptcy in 2014, it had 92 stores across the country. Meanwhile, Mexx will close the last of its 95 Canadian stores over the coming weeks.